SEC Crowdfunding Investments rules make it easier for Self-Directed IRA and Solo 401(k) Plans to invest in start-ups and other ventures
IRA Financial Group & IRA Financial Trust Company, a leading financial technology Self-Directed IRA provider & custodian, has seen a continued interest in self-directed IRA investors looking to invest in a crowdfunding platform. Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects. Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities. “Self-Directed IRA crowdfunding investors have been intrigued with the possibility of using retirement funds to invest in business or projects that they have a personal interest or connection to,” stated Adam Bergman, President of the IRA Financial Group & IRA Financial Trust Company.
According to Mr. Bergman, “prior to the 2016 updated SEC rules, private companies could seek money only from ‘accredited investors.” That’s defined as individuals who own more than $1 million in assets, excluding their primary residence, or have maintained an income of more than $200,000 for at least two years. Under the 2016 SEC rules, those with more modest wealth will be able to invest in startups, with limits. People with annual income or net worth less than $100,000 will be allowed to invest a maximum of 5 percent of their yearly income or net worth, or $2,000 if that is greater. Those with higher incomes can invest up to 10 percent. An individual can’t invest a total of more than $100,000 in all crowdfunding offerings during a 12-month period. Investors generally couldn’t resell their crowdfunding securities for one year. The SEC also specified that crowdfunding must go through an intermediary, either a broker-dealer or a registered funding portal. Offerings need to be checked by outside accountants, and, in some cases, fully audited. “While using a self directed IRA to make crowdfunding investments offers one the ability to make high risk high-reward investments, it also presents the potential risk of fraud and the potential for the triggering of a tax called the unrelated business taxable income tax or UBTI, which can go as high as 37%.”
IRA Financial Group is the market’s leading provider of self-directed retirement plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate, cryptocurrency, and private business investments.
The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group. Mr. Bergman is a leading expert on the taxation of retirement funds and has authored multiples articles on how to use a self-directed IRA to buy cryptocurrencies.